Duke Energy Ohio's electric distribution rate case
On March 2, 2017, Duke Energy Ohio (Duke) submitted an application to increase its rates for electric distribution service.
What are distribution rates?
Electric bills are comprised of two main components – the cost of producing electricity and the cost of distributing or delivering electricity to homes and businesses.
The distribution rate pays for all the cost of distributing electricity to your home or business, including the cost of installing and maintaining the electric lines that run through neighborhoods, reading electric meters, processing bills and taking customer service calls.
What is the PUCO’s role in setting electric distribution rates?
Under Ohio law, a public utility is allowed to recover from customers its operating expenses, plus a reasonable return on its infrastructure investments. When a utility requests a rate increase from the PUCO, several steps are taken to review the company’s financial condition and ensure the company is fulfilling its obligations to customers.
When evaluating the company’s application, the PUCO examines whether the proposed rates will provide the company with adequate operating revenue. In general, the cost of providing service to customers, maintenance of infrastructure and equipment expenses, depreciation expense, taxes and a return on the company’s infrastructure investment are used to calculate the company’s revenue requirement. PUCO staff prepares a report that makes recommendations to the Commission.
What did Duke Energy Ohio request in its application?
Duke requested to increase distribution rates by $15.4 million, or 3.18 percent, over current revenues. The company proposed to establish a rate of return of 7.82 percent.
Additionally, Duke proposed to increase the fixed customer charge while reducing the volumetric charge of the distribution rate. The fixed customer charge is the portion of the customer’s bill that remains the same regardless of a customer’s monthly consumption of electricity. The volumetric charge is the portion of the customer’s bill that varies based on the customer’s monthly consumption of electricity.
What did the PUCO staff recommend?
On Sept. 26, 2017, the PUCO staff issued a report recommending a distribution revenue decrease in the range of $18 - $29 million or a decrease of 3.77 to 5.94 percent. The PUCO staff recommended a rate of return in the range of 7.22 to 7.74 percent. The PUCO staff also recommended that the existing fixed/volumetric rate-design be maintained.
These recommendations were based on the PUCO’s staff examination of Duke Energy Ohio’s accounts and records. The Commission is not bound by the staff recommendations and may implement some suggestions and reject others.
How did the PUCO rule on the application?
On April 13, 2018, a settlement agreement was filed, intended to resolve the signatory party’s issues in the distribution rate case, electric security plan, and reliability standards application. The settlement agreement was signed by Duke Energy Ohio, PUCO staff, city of Cincinnati, Ohio Partners for Affordable Energy, Ohio Energy Group, Ohio Hospital Association and People Working Cooperatively, Kroger, Industrial Energy Users-Ohio, Ohio Manufacturers’ Association Energy Group, and Walmart.
The PUCO approved the settlement agreement on Dec. 19, 2018. Duke’s base distribution rates will be lowered by more than $19 million annually and establish a rate of return of 7.54 percent. Duke will provide $772,000 in annual funding for various low income assistance programs in coordination with the city of Cincinnati and people Working Cooperatively.
Duke will continue to make grid modernization investments and capital improvements during the term of the ESP, subject to annual cost caps and ongoing Commission review. Grid modernization efforts will allow competitive electric suppliers and third-parties access to usage data, enabling them to offer innovative products and services to their customers.
Through the Commission’s order, Duke will pursue more aggressive annual reliability measures during the term of the ESP. Duke will also continue its five-year vegetation management program to ensure system reliability.
Duke will recover/credit the net proceeds from selling power from its share of the Ohio Valley Electric Corporation into the regional marketplace through the nonbypassable Price Stabilization Rider, consistent with previous Commission decisions for AEP Ohio and Dayton Power & Light Company.
How will my bill be affected?
A residential customer using 1,000 kilowatt hours (kWh) per month will see an increase in their monthly bill by approximately $1.57. However, the Commission also noted that a pending proceeding related to a rate reduction as a result of the Tax Cuts and Jobs Act of 2017 will help to mitigate this rate increase.
Did the PUCO consider public opinion in this case?
The PUCO held two local public hearings to provide the public an opportunity to express their views and provide testimony regarding the company’s application in Hamilton and Cincinnati on Oct. 30 and Nov. 2, 2017
For more information?
If you would like to know more about the PUCO or have utility-related questions or concerns, contact the PUCO at (800) 686-PUCO (7826) or visit us online at www.PUCO.ohio.gov.